With Hong Kong having United States dollar reserves of eight times the Hong Kong currency in circulation, why should we be preyed on by speculators and have to suffer gyrating interest rates, with the consequent loss of confidence in not only the Hong Kong dollar but also the immediate prospects of the Special Administrative Region? To squarely address the problem, and prove once and for all that this administration means what it says about no devaluation, it is time for the Monetary Authority to collaborate with the banks and guarantee the Hong Kong dollar by converting overnight into what are effectively promissory notes, changing the inscription on subsequently issued notes such that they read 'promises to pay the bearer on demand at its office here US$1 for every HK$7.75' and honouring previously issued currency on the same basis. The Monetary Authority can set aside the US dollar equivalent of notes in circulation and eliminate any speculative attacks on the currency which would mean interest rates would settle to those of the US, with local spread. The benefits which would flow on from this would include a recovery in the property sector and a renewed confidence in Hong Kong's future - all these with no intervention. In the event that there is a belief that in the long term Hong Kong may wish to revalue, a new exchange rate can be struck in a similar manner, with the two 'promissory notes' up for redemption at their respective values. On this basis, deals can be done in HK dollars which straddle years, with no fear of being wiped out by a devaluation some time in the future, or strangled by unpredictable interest rates. RIC GROSVENOR Kowloon
